Valuation Comp Skyrocketing

Heard from a few guys taking valuation jobs that the comp has been going up consistently over the last few years. Know a guy that just signed on for $180k all in for analyst 1. Is the slightly better pay and exit opps in banking really worth it? Assume with the added comp and additional prestige, PE exit opps might be a viable option after valuation gigs in the future. 


I don't think people put the same value on powerpoint skills gained in banking as they have in the past. Would rather want someone who knows their way around a model. 

 

I don’t think many people are picking their analyst job based on comp. A lot of boutiques will pay $100K+ more over the course of two years than a BB. However, most people will take GS over a boutique with the exception of Evercore / PJT. Almost anyone can learn the modeling skills needed for banking / PE. You're going to GS to build personal brand equity and develop a large network that will span industries and geographies. This is far more important in the long term than being able to build a model marginally better. Even if valuation jobs paid $200K, I imagine most people, myself included, would still pick investment banking. Investment banking provides a strong platform to pursue finance or pivot to a different industry and allows you to very quickly develop a network of people with influence. Just meeting one well connected MD who is willing to open their network to you makes the job worthwhile (and many will if you do a good job and they trust you won’t embarrass them). 

 

I humbly disagree. The modeling skills are becoming more and more valuable, hence the higher pay. The world of finance nepotism is essentially over and spoiled kids like yourself will soon realize it.

I hope your MD sees this bro - stop sucking him off.

 
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With time, anyone that can link numbers and is able to develop a rough idea of what the output should look like before beginning can model without making mistakes. Modeling is not important beyond your first few years. What important is being able to develop a view, effectively communicate your position and have an extensive network that can make sure your views make it to the right people. Unless your some math whiz that can develop algorithms, your technical skills aren’t going to take you very far. Calculus at Harvard is no different than calculus at community college, but community college won’t provide you with the same network or enable you to make connection with peers that will likely work in positions of power later on. I might be wrong, but I think you misunderstand what “valuation” work means at HL. This is essentially providing fairness opinions to boards of directors for a fixed fee. Anyone who has done fairness opinion work can probably let you know that it is not fun. Everything has to be extremely precise (manually spread and triple checked) and it is incredible tedious and often on tight deadlines. Moreover, your “modeling” is going to be nothing more than linking company provided numbers and making sure that your UFCF build isn’t busted. You will not be making assumptions, building in cases or helping management think through the strategic rationale. Your sole job is to take management numbers and spit out a value and back it up with meticulously spread comps to say a deal is “fair.” No judgement, opinion or thought is exercised in this process (especially at the analyst level because you aren’t picking the comps / WACC) because it opens your firm up to liability. Beyond the analyst level, the job is more about having connections and a point of view that you can convince people of. 

 

I do not think people on this site give valuation roles enough credit. The exits opps are arguable on par w/ a regional boutique. While the regional boutique will give you a chance at PE and better lateraling chances, val at a HL/Duff/Big 4 will give you a better network (not many alumni from a small boutique) for any jobs outside IB/PE/CD and a better brand.

IMO, as only an intern keep in mind, bankers are mostly picked off because people assume IB has the best talent. Why do several L/S HFs prefer IB analyst to ER associates when ER provides more applicable skills? It is because of prestige. Likewise, bankers mostly shift through power points and arguably have worse modeling skills than those in valuation (just ask those who transferred from valuation to IB). Again, prestige and networking outweigh the superior modelling skills valuation guys have.

 

I have done both so I'll chime in. Valuation modeling and and banking / PE modeling are different. In Valuation, you're linking up comps, WACC's, DCF's, etc. You're really just building a skeleton that spits out some outputs. Even with Purchase Price Allocations, it's pretty simple. I worked on "deals"/businesses from $25m to $25bn too. When I was in val/TAS, I couldn't do a 3 statement model, as I never needed to. When I got to banking, I had to learn it but I did have the benefit of the "basics" from val, which gave me a big leg up.

I do agree that people don't give val enough credit. I did ~1 year of it and was able to get BB/MM interviews relatively easily. I think it's one of the best 1st jobs if you're ultimate goal is IB/PE as it provides the path of least resistance. 

 

when we do an acquisition, my team does the actual valuation for the deal. the not so secret dirty secret is that we spend a lot of time building a detailed operating model, then mess with the WACC, comp sets, etc. to get them to support what works to be a low teens multiple, which is what we pay for basically all our businesses (go up or down a couple turns depending on how convicted, and how competitive the process it). ultimately, its the qualitative things that support the quality of that business's growth - customer base, management, etc.- which are not easily represented in all that valuation display stuff.

then the big4 group we use will come in and do technical "valuation" for purchase price allocation, fair value, balance sheet, etc. purposes on the back end. its definitely complex math, but its also pretty templated stuff they just feed inputs into.

 

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